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Information About Innovation:

Title:

NHS Mortgage Corp. “The Borrower’s Broker”

Contest Category:

Innovative partnerships to sustain homeownership - 2008

Summary:

With the development of NHS Mortgage Corp. (NMC), a nonprofit mortgage brokerage, NHS has been able to strengthen and leverage our partnerships in order to bring about stability to today’s volatile market. As our neighborhoods face record foreclosure rates, NMC will help to stabilize these markets through enabling and preserving sustainable homeownership.

Description:

Through its partnerships, NMC has already achieved innovations in the establishment of the non-profit mortgage broker business. While not the first or the only nonprofit brokerage, NMC stands apart in its ability to innovate and affect change in the banking industry. For example, NHS is the first nonprofit that has been able to negotiate significant changes to the banks’ Wholesale Broker Agreements in order to make the liability standards appropriate for the operation of a nonprofit brokerage. Also, when the credit crunch resulted in a lack of conventional mortgage products for purchasers of mixed-use properties, NMC convinced Chase to offer such a product according to the needs that NHS witnessed in the market. This product was developed jointly and is now offered by Chase exclusively through NMC. Once NMC has achieved operating success at the conclusion of its pilot stage - December 2009 – it will have created a model that is not only self-sustainable but also replicable nationwide. In fact, other non-profits have already benefited from the work of NMC by utilizing the brokerage agreements that NHS negotiated.

NHS Mortgage provides its customers with a variety of purchase and refinance products designed to support and preserve sustainable homeownership. As a result of market research, NHS discovered that its brand signifies the “trusted advisor” to the communities that it serves. NHS Mortgage will leverage and promote this brand identity in the new markets and populations that it serves by positioning itself as the “borrower’s broker.” Unlike the standard mortgage broker that is a loan salesperson, NHS Mortgage provides an enhanced level of service, akin to that of a financial advisor with a fiduciary duty to make recommendations that are in the customers’ best interest.

Many of our customers would have fallen prey to unscrupulous lenders, as prior to coming to NHS they were speaking to a local or online broker. Through our interaction, borrowers are educated on the mortgage process and are provided with a clear understanding of mortgage costs and the best product fit. Our first 2 customers were each able to save over $11,000 working with NMC versus the offer provided by other mortgage brokers. We anticipate that our clients will be able to sustain homeownership and stabilize their neighborhoods as they are better educated consumers with the right product fit.

NMC and its business model has already attracted the attention of many major industry players including: John Dugan, Comptroller of the Currency, who voiced his support of NHS’s “Borrower’s Broker” business model in a 2007 speech; Carl Levinson of CitiMortgage, who was the first lender to allow NHS to modify the standard broker agreement; and Dave Lowman, of Chase, who has joined the board of directors of NMC and enabled Chase to develop a mixed-use loan product exclusively with NMC.

The NHS Mortgage Board is also representative of our partnerships with business and community leaders. Our board includes representatives from CitiMortgage, Chase, Fannie Mae, HCCI, GE, as well as community leaders from Harlem, South Bronx, Bedford Stuyvesant, East Flatbush and Northern Queens communities. The New York State Banking Department, WaMu, M&T Bank, NWA, Fannie Mae and the State of New York Mortgage Agency have also been instrumental partners in this endeavor.

Projected Annual Operating Cost:

Annual Operating Costs are approximately $300,000 which includes salaries and benefits for 3 full-time staff members, the business director, the mortgage originator and the loan processor. These costs also include the NMC’s proportional share of NHS’s overall operating expenses including occupancy costs and other administrative costs. As volume increases, NMC will add additional staff to the extent that it is justified by the earnings. Pre-development funds for business planning and implementation were provided by NWA and Fannie Mae. Nixon Peabody also provided pro-bono legal assistance.

Specific Outcomes or Results in Calender Year 2008:

In light of the market slowdown, NMC will diversify its product offering and remain tuned into the markets and the community in search of opportunities. Over 2008 NMC will continue to look for niches in the market that are underserved and present an opportunity for a borrower’s broker to be successful. NMC will be able to withstand current market conditions by offering a wide range of products including those that many lenders do not offer or do not promote, including the state HFA products, loans for mixed-use properties and reverse mortgages.

To date, NHS Mortgage has closed $2.2M (8 loans) in low interest, low fee, fixed-rate mortgages, with another $3.4M (7 loans) preparing to close. Our goals for 2008 are: make mortgage marketplace fairer to consumers by brokering 100 loans in 2008 that are in the best interest of the borrower; and increase the number of educated borrowers in the marketplace by referring at least 50 customers sourced by NMC to education programs.

Web Site (optional):

http://

Information About Organization:

Name:

Neighborhood Housing Services of New York City, Inc.

Address 1:

307 West 36th Street

Address 2:

12th Floor

City, State, Zip:

New York, NY 10018

501c3 Non-Profit:

yes

Contact Name:

Susannah Gillette

Contact E-Mail:

susannah_gillette@nhsnyc.org

Contact Phone:

212/519-2518

Keywords:

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